11. The government of the island of Guernsey having no money, issued paper-notes to pay for the building of a market. They circulated and were gradually taken up as the market earned its cost, during ten years. When they were all redeemed and burned, the island had the market free of cost. Explain how this could be done. (From Sumner's Problems in political economy.)
12. Suppose a nation has 1,000,000,000 gold coins, each weighing one ounce (Troy) as its only circulating medium. Suppose that the government enacts that henceforth coins will be uttered containing only 99 per cent. as much pure gold as heretofore, the government taking one per cent. for its own use.
Suppose "other things remain the same." What effect will this action have on the number of coins circulating?
Will prices be affected?
Now suppose the demand for money increases. Will bullion owners bring their bullion to the mint for coinage?
Suppose this government had continued to utter coins of the same weight and fineness as before, but had kept back one per cent. of the bullion brought to the mint for its own use. Answer these three questions in the light of this supposition.
13. Tabulate the index numbers, the greenback price of the gold dollar, and the gold price of the greenback dollar, from 1861 to 1879.
14. Show the difference between convertible and inconvertible money.
15. Contrast the position of the commodity money theorists with that of the fiat money theorists.
16. In a gold-standard country, one-half of whose monetary circulation consists of silver dollars (which are unlimited legal tender) and of silver certificates payable on demand in silver dollars (and supported dollar for dollar by silver dollars in reserve), and whose mints are closed to the free coinage of silver, how would the money value of the silver dollars and silver certificates be affected if the gold price of silver should fall (1) 10 per cent.? (2) 50 per cent? (3) 5 per cent.? How would it be affected if the value of gold should fall 10 per cent? (Free coinage of gold is assumed). Explain the principles involved in your answer.